LONDON--

Freeserve

(FREE)

, the U.K.'s largest Internet service provider, will announce its full-year results Tuesday. Rather than balance sheet figures, however, the number concerning most investors is how much Germany's

T-Online

may be willing to pay for the company.

Electronics retailer

Dixons

(DXNGY)

, which owns 80% of Freeserve, declined to comment on the ISP's future. According to the terms of the flotation, June 27 is the earliest Dixons can sell the first half of its stake in Freeserve.

That timing coincides with the lifting of restrictions on

Deutsche Telekom

( DT), T-Online's parent, which is prohibited from announcing new merger or acquisition activity until a recent issue of shares begins trading this week. T-Online has been looking for an opportunity to break into the U.K. market.

The near simultaneous lifting of restrictions on both predator and prey has sparked speculation that an announcement of some kind will be made.

"We're expecting something to happen, but we're not sure in which direction," said one analyst.

Even amid the speculation, signs have emerged that T-Online may not be prepared to buy the ISP at the price Dixons will demand. Last week T-Online chief executive Wolfgang Keuntje made cryptic

remarks to reporters suggesting that he was also considering building a U.K. ISP from scratch with mobile-phone operator

One2One

, also owned by Deutsche Telekom. The message was clear: T-Online wants Freeserve, but not at any price.

Dixons is believed to want about 600 pence per share for the ISP, which would value the company at 6 billion pounds ($9 billion).

Peter Misek, an Internet analyst at

Chase H&Q

, thinks this is a reasonable price for Freeserve, which he says is 60% undervalued on a market capitalization-per-subscriber basis compared to other ISPs such as

Terra Networks

and T-Online itself. "Realistically we think Freeserve will go for around 650p," he said in a recent note.

He also thinks that if T-Online does drop out,

France Telecom

(FT) - Get Report

, which has barely been mentioned as a potential bidder in the past few weeks, should consider making an offer. "Given the animosity

between Deutsche Telekom and France Telecom, we believe Freeserve would be an attractive asset to either."

Other analysts are more skeptical about Freeserve, however. Last week,

Salomon Smith Barney

cut its rating of Freeserve to underperform. "Freeserve could be duplicated with a cash investment far below its current market capitalization," the SSB analysts say.

Chase H&Q sees Freeserve posting operating losses of around 21.4 million pounds. Both Chase H&Q and Solly forecast that Freeserve's full-year revenue would rise to about 18.2 million pounds.

In New York trading on Friday, Freeserve was off 2 3/4, or 4%, to 66 7/8.